Banks Face Lawsuits Over Mortgage Modification Policies

Mortgage modification programs have become a popular form of debt relief for homeowners who are struggling pay their home loans each month. But for some families, the process has made their financial situations worse, leading to a number of lawsuits.

Some families are receiving trial modifications, which allow homeowners to pay a reduced loan amount for a certain time period while their application is being processed. However, a few have found that despite being current on all their payments, they are being denied a permanent modification with no explanation. Further, banks are reporting the payments made during the trial period as "partial," leading to long-term credit score damage, according to USA Today.

Class-action lawsuits have been filed in recent months against banking giants, such as Bank of America, JP Morgan Chase and Wells Fargo.

The Home Affordable Modification Program has been successful in helping nearly 400,000 homeowners secure permanent modifications. But consumers should make sure they understand how the process works and explore other debt relief options that may help them save money on their mortgage payments. Consumers who do not qualify for HAMP should consult with their lender, many of whom offer separate debt relief opportunities.